Sports goods retailer Signa Sports is recording a loss and warning investors of an uncertain future. In the first half of the fiscal year, the subsidiary of the Signa real estate group posted a minus of 180,5 million Euros. The retailer urgently needs liquidity to keep the business running.
Signa’s parent company had recently signed off on a cash injection of 130 million Euros. But this is obviously not enough. On June 26, 2023, it came to an additional capital investment declaration for another 150 million Euros until September 2025.
Notwithstanding the hard financing commitments obtained from SIGNA Holding, the Company is working to extend the terms or refinance its revolving credit facility of 100 million Euros which falls due in May 2024.
“A failure to extend the terms or refinance the Company’s existing revolving credit facility by May 2024 could have a material adverse effect on our business, financial condition, results of operations and prospects, raise substantial doubt about the Company’s continuation as a going concern and ultimately cause our business to fail and liquidate with little or no return to investors”, says the company in its recent report.
On the supply side, stock levels across the industry remain severely elevated as market participants aim to clear excess inventory, resulting in a meaningful compression of gross margins and negative cash flows.
“The first half of our fiscal year has been marked by challenging conditions across the sports retail industry. While macro headwinds and oversupply in the market have pressured our financial results, we have remained focused on positioning our business for success as operating conditions normalize”, comments Stephan Zoll, CEO of SSU. Looking towards the second half of the year, CFO Alex Johnstone expects “the lingering effects of excess stock in the market to challenge margins.”
For the full year, the company is looking at a decline in sales of up to 11 percent and Free Cash Flow of between 250 million and 270 million euros. But the company is looking beyond the “short-term turbulence” and reiterating its belief that the actions taken as part of its strategic realignment point a clear path to sustainable long-term growth.
